Apple's 'iAd for Developers' May Not Be Cost-Effective

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Late last month, Apple enhanced its iAd mobile advertising platform to allow app developers to purchase ad space for simple banners that expand to display "in-app" App Store pages that allow users to read about and purchase applications without leaving the app they are currently in. Billed at $0.25 per click as opposed to the per-impression and $2-per-click fees for traditional advertisers using interactive ads, iAd for Developers appeared to offer a way for small developers to make use of the company's platform.

Anecdotal evidence from developer David Smith of Cross Forward Consulting (via Silicon Alley Insider) suggests, however, that the program may not be cost-effective for developers, as a test ad campaign resulted in low click-through and conversion rates for an app priced at only $0.99.

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From August 19 through August 25 I ran a campaign on the newly released iAd for Developers platform for our Audiobooks Premium app. The results were, to say the least, disappointing. For all the promise of selling your apps directly within an advertisement, it appears that so far this is not a viable way to drive traffic and create an economically sustainable promotion. For $1,251.75, my campaign generated a total of 84 downloads, thus a Cost Per Acquisition (CPA) of ~$15. For a $0.99 app, those economics just can't work out.

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The remainder of the post details the process of signing up for an monitoring the iAd for Developers, and while Smith was pleased with the professionalism of Apple's iAd staff and the ease with which he could monitor his campaign, the return on investment was simply nowhere near what would be required to be viable. While an application carrying a higher price tag or significant in-app purchasing content might stand a better chance of seeing a profitable ad campaign, conversion rates would likely be even lower for a more expensive application.

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Given that the cost for the campaign is entirely based on clicks, we designed our banner to try and provide the audience with all the basic information they need to understand what Audiobooks is and whether they might be interested in purchasing it. This lead to a more textual treatment than a graphical one. Since we don't pay for impressions we only wanted truly interested people clicking on the advertisement.

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Smith's banner ad for Audiobooks Premium
Apple's iAd program utilizes a "targeting system" that helps identify which users might be most likely to respond to and purchase a given application, and for that reason, Apple's staff encouraged Smith to continue the campaign beyond the first few unsuccessful days in hopes of refining that targeting and boosting yields. Improvement was non-existent, however, and the campaign was canceled after six days and only 84 downloads on over 2 million impressions.

Smith also performed a comparison campaign using the same banner ad on AdMob's network, finding a click-through rate over five times higher than that for iAd, and with AdMob's cheaper cost structure, Smith's cost-per-click was over six times cheaper on AdMob than on iAd. The reason for the significant difference in click-through rates between the platforms is unclear, especially considering the widely-held belief that the iAd program would offer a "premium" branding that would be more enticing to users than traditional banner ads.

macrumors 601

uhm, if you have 1275 clicks but only 84 downloads then the App seems to be not good enough or only of interest to a very limited customer group.

This is not necessarily an iAd problem.

iAds are not there to increase sales of uninteresting goods. They are there to make interesting good products more visible. All starts and ends with good products. I'm always stunned that people think that advertising and marketing can fix everything. Only sometimes it can. Most of the time it can't.

In this particular example i have to say that i have a ton of classic audiobooks for free on the web anyway. Even more you can order them on DVD's so that you have them available without filling up your HD. So at least I personally don't see a need for this 99 cent app. And advertizing is not going to change that.

macrumors member

I don't think a single advertiser's (negative) experiences warrant even raising the question of whether an entire advertising platform will be successful, especially one that will evolve over months and years.

macrumors member

As a big audiobook fan, who listens to many regularly in long car trips, I can say with certainty that I wouldn't download this (at least based on that banner) for free. My first thought is, "wow that would be a LOT of space used up on my iPhone for audiobooks I'd almost certainly never get around to listening to." Mostly, I'd click on it, get a sense of their titles, and then realize that 'classics' mean old, boring, wordy titles with low imagery not suited for times when I'm usually listening to audiobooks.

In other words, if they were offering a more attractive product, they would have made more sales. 'Premium' advertising should be used when you have a really good product.

macrumors 6502a

Since Apple stands to gain from the sale of Apps even through inApp Ads, they should just make them free. If you cross advertise an App, you pay nothing. Apple gets their cut and so do you. Or if Apple wanted more, they could just change the split. Make it a 60/40 split for Apps sold through inApp Ad clickthrough.

macrumors 6502a

uhm, if you have 1275 clicks but only 84 downloads then the App seems to be not good enough or only of interest to a very limited customer group.

iAds are not there to increase sales of uninteresting good. They are there to make interesting good products more visible. All starts and ends with good products. I'm always stunned that people think that advertising and marketing can fix everything. Only sometimes it can. Most of the time it can't.

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I largely agree. However, if the same developer with the same app has a higher purchase rate using a different ad network, then for him, at least, iAd is not cost effective. However, this is a single sample so no general conclusions should be drawn from it.

macrumors 6502

I don't think a single advertiser's (negative) experiences warrant even raising the question of whether an entire advertising platform will be successful, especially one that will evolve over months and years.

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yeah, well it's a slow news day, so we make up the news! this will eventually makes the rounds on mac sites and end up on bloomberg, where Jobs will loudly decry it's iAdgate.

macrumors 68000

macrumors member

What I've just realised is that at $0.25 per click, a developer with a $0.99 app would need more than 1 in 3 people who click through to buy to make a profit, given the developer takes home $0.70 from a sale. (Assume that later referral sales and so forth do not account for a great deal more, or cannot be easily calculated.)

That's an absurdly high conversion rate for an advertisement, and should have been noted from the start with even the most basic of calculations. I don't see what the developer was hoping to achieve here.

In other words, if they were offering a more attractive product, they would have made more sales. 'Premium' advertising should be used when you have a really good product.

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This is the real issue here, not the platform itself.

If you're a small business owner, say an independent coffee shop, you wouldn't even dream of purchasing space on the billboard next to the highway, or taking out a half-page ad in the national paper. It simply wouldn't be cost effective for you. This doesn't mean that highway billboards and newspaper ads are ineffective or not worth the cost.

macrumors 6502

However, if the same developer with the same app has a higher purchase rate using a different ad network, then for him, at least, iAd is not cost effective.

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This point is quite good. It's not about the quality of the app or the appropriateness of the medium. The problem is the same advertisement of the same app on iApps wasn't as effective as an advertisement on the competing network.

Yes, it's anecdotal and only one experience, but here is smoke. One should probably go check if there's fire.

macrumors regular

The author gives away the root problem himself, "I have tried just about every advertising platform around and have generally found none of them to be demonstrably effective."

Too many successful apps have shown the opposite for this to be true. Obviously, in this situation, I would think the problem lies elsewhere. Perhaps the app, as others have suggested, or the content of the app's page in iTunes, or perhaps even the price - which, for a $0.99 app, could be too low.

I wonder if we would see any difference if it was tried on a free App. Personally, when I pay for an App I don't want to see any ads, therefore, I'm less likely to click on one in a paid App. Just a thought.

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